How StockStreaks Works

StockStreaks helps you cut through daily market noise and surface moments where stocks are most likely to snap back. Here’s the simple logic behind the engine.

1. Raw Price Isn’t Enough

A stock being “down” means nothing on its own. Context is everything.

Example:

• Down –1% while the S&P is up +1% → true weakness
• Down –1% while the S&P is down –2% → unexpected strength

Most tools treat those the same. We don’t.

2. We Measure Relative Performance

To understand what a stock is actually doing, we compare its daily return to the market.

This creates two types of streaks:

• L-Streak: Underperforms the S&P for n days in a row
• W-Streak: Outperforms the S&P for n days in a row

This removes broad market movement and isolates real, stock-specific momentum.

3. Why Streaks Matter: Mean Reversion

Long underperformance streaks often reflect investor overreaction — a well-known behavior pattern in markets.

Think of it like a rubber band stretching:

• Early days: Reaction to news
• Middle days: Fear-driven selling
• Day 5 (L5): Selling pressure is exhausted

At that point, the odds of a short-term snap-back increase sharply.

4. The Setup We Look For

Our strongest signal is an L5: five straight days of underperformance.

At this stage:

• Sellers are mostly out
• Value buyers and algorithms begin stepping in
• The stock often reverts toward its recent average the next day (T+1)

This is the moment we surface.

5. Backed by Independent Research

The phenomenon behind our signals is documented in the academic paper “Streaks in Daily Returns” (Klos, Koehl, Rottke, 2023). Their findings match our approach: relative streaks consistently improve short-term return predictions.

6. What You See in StockStreaks

When we tag an Peak Streak, it means:

• Filtered: Market noise removed
• Detected: A high-conviction relative streak identified
• Validated: Historical next-day reversion odds support the setup

No black boxes. Just transparent, evidence-based signals.